AN Update
A news report for Ansett Australia employees
AN Update 035
17 December 2001

Message From Mark Mentha

The following media announcement just released by the Tesna Consortium is another terrific step in the right direction for the “all new” Ansett as we head towards the launch date of 1 February 2002.

INVESTMENT PARTNER JOINS LEW, FOX: Mr Solomon Lew and Mr Lindsay Fox announced today that a heads of agreement had been signed with Air Partners III Australia, LLC ('Air Partners') to become an equity partner in Tesna Holdings Pty Ltd ('Tesna').

Tesna will become the new owner of Ansett from 31 January, 2002 following completion of the sale agreement with the Ansett Administrators for the mainline airline assets of the Ansett group.

The key principals of Air Partners include Mr David Bonderman and Mr Bill Franke. Mr Bonderman is the Chairman of Ryanair and a Director of Continental Airlines. Mr Franke was CEO of America West Airlines from 1993 to August 2001 and Chairman of Airplanes Group plc, a large aircraft finance entity.

Messrs Lew and Fox said "The Air Partners team brings to Tesna and Ansett significant and successful airline and aircraft finance experience that includes investments in Continental Airlines, America West Airlines, Ryanair and the aircraft finance company AerFi, plc (formerly GPA, plc)".

"The common theme in their airline related investments is an active and direct involvement to achieve significant improvement in operating and financial performance and business turnaround. Ryanair, for example, has been transformed from a niche operator to become the second largest airline by market capitalisation in Europe, with a value higher than British Airways", they said.

Mr Bonderman said, "We believe Ansett represents a unique circumstance where we, working with committed local partners, can restore and build value."

Mr Franke said, "Having looked first hand at Ansett and the overall market in Australia, I am convinced Ansett can be restored to being a great airline, and a great business, of which employees and the travelling public can be proud."

Messrs. Lew and Fox said, "Air Partners will contribute human resources, intellectual and financial capital and an international network of industry relationships to Ansett. Mr Franke, as Air Partners' managing member, will be primarily responsible for the investment and will commit substantial time. He has been in Melbourne again this week and we will together pursue as a priority the selection of key senior management which we hope to be able to announce in the near future."

"While we actively explored a number of alternative arrangements to manage and operate Ansett we believe the track record of Air Partners' principals in building strong management teams and actively managing their airline investments is the preferred outcome."

The terms at Air Partners' investment in Ansett are confidential, however Messrs Lew and Fox, while sharing management control, will retain majority ownership and will be Co-Chairmen after 31 January.

The Air Partners investment is subject to approval by the Foreign investment Review Board.

I will second that "very interesting" statement!
After hearing about services on America West, I hope they don't bring it here! Could this also have something to do with half of the Fox/Lew consortium being involved with CO for 10 years?
At least they'll have aviation specialists running the airline. What I hope is they allow Australians to run it, and don't just do another Air New Zealand.

Wirraway - I haven't seen the thread on Franke, but by the sounds of your comments, I can guess what's being said. More than likely it's fairly close to the truth. What he did to Cactus in his years at the helm there, speaks volumes. Very worrying to see he will be the hands on "input" person for high level decisions. On the plus side, Bonderman was instrumental, along with Brennerman and Bethune at turning CO around, if my memory serves me correctly. SQ have been slapped in the face yet again, but by the sounds of it, they were wanting too much of AN for too little in return. It also gels with recent speculation that SQ is after AN International and not AN mainline. One would think that this is much more than a simple investment on behalf of Air Partners 3 (Aust.), given the amount of money needed and the long time required to wait for any sort of return. Interesting days in so many ways.
Cheers/Regards. Al.

A powerful international syndicate has thrown its weight behind the bid for Ansett by the Fox-Lew Tesna group, boosting its chances of a successful relaunch of the collapsed airline.

The consortium, led by the chairman of UK budget carrier Ryanair and Continental Airlines director, Mr David Bonderman, and a former chief executive of America West Airlines, Mr Bill Franke, has agreed to take between 35 per cent and 49 per cent of Tesna and play an active role in the management of the airline.

The deal puts pressure on Sir Richard Branson's no-frills carrier, Virgin Blue, which is also searching for an equity partner and has held talks with the Texas Pacific Group of Mr Bonderman and Mr Franke, among other potential investors.

It also leaves Singapore Airlines, which had been discussing a management contract with Tesna and the Ansett administrators, without a direct role in an Australian carrier. However, Tesna is negotiating commercial arrangements with Singapore and other Star Alliance carriers.

"Having looked first hand at Ansett and the overall market in Australia, I am convinced Ansett can be restored to being a great airline, and a great business, of which employees and the travelling public can be proud," Mr Franke said in a statement yesterday.

Ansett's administrators have conditionally sold the airline's mainline operations to Tesna.

However, the deal requires approval from Ansett's creditors at a meeting in January and is still being contested by Lang Corporation and Virgin Blue.

The chief executive of the dominant Qantas Airways, Mr Geoff Dixon, acknowledged the experience of Mr Bonderman and Mr Frank in the industry, saying: "These are serious people and we will take them seriously."

Virgin Blue's head of commercial operations, Mr David Hutt-
ner, said the carrier had always expected a third competitor and that the deal was "interesting".

"I think they'll find it's a very different operating environment in Australia," he said.

Tesna said that under the heads of agreement, Mr Bonderman's and Mr Franke's Air Partners III Australia would "contribute human resources, intellectual and financial capital and an international network of industry relationships to Ansett".

Mr Franke, who will oversee the investment, would work with Mr Fox and Mr Lew to appoint the senior management team. This is expected to be finalised this week.

An interesting development... those who recall the longer-term, will remember that Ansett used to have an equity position in HP.

One cannot help but speculate about possible long-term implications for possible linkage w/ CO (I don't regard much chance of that w/ HP, as HP's key goal at this point is survival, not expansion, whilst CO could certainly build upon its substantial Pacific presence and its prior service to Oz).

In any event, a nice hedge against regional weakness, and an interesting (and important) show of support from overseas to help amplify the legitimacy of AN-III's (or 2.5's) revival.

[Dow Jones] Investors spooked by arrival of experienced airline execs David Bonderman and Bill Franke onto local airline market, driving Qantas' share price 3.0% lower to A$3.74 with some 7.5 million shares traded in first 2 hours, says Sydney-based senior dealer at major institutional bank. Dealer says a "major cause of concern" for Qantas after Solomon Lew and Lindsay Fox secured Bonderman and Franke to take an equity stake in a revised Ansett. Notes agreement may have been in the pipeline for a while but Lew-Fox may have been trying to get government concessions first. (LXV)

IMHO it will all come down to how the new management
handle the former Global Reward punters as to how
quick AN3 will regain their corporate customers, if
they choose to ignore them, then they will still find
themselves between a rock and a hard place.

- All previous Golden Wing members will have their memberships honoured.
- All previous Star Silver and Star Gold GR members will keep their status even though these were due to be wiped by Star on 31/12.
- Previous GR points holders will have their points given back to them as they earn new points on the new Tesna scheme. Last I heard, this was a 1 old point back for every 2 new points earned.

Realistically, this is the only sensible option for Tesna. They get back some of their previous loyal customers and especially higher yielding Gold tier members. Whilst some of the old Gold pax will stay with QF, many will be happy to return to AN if they feel they can trust the airline to operate securely. Some of these people have gone from Star Gold status and all the privileges that offered them to Bronze QF FF membership and will be keen to get back some of their old luxuries.

To re-instate points without having them tied to use on the new airline would not get people back to AN. All that would happen is that previous GR members would flood the switchboard to redeem points on "hard currency" Star partners such as SQ. This would quickly send Tesna broke and Star would probably walk away from honoring the tickets anyway.

on the new F/L section of the AN website it states that a "completely new frequent flyer programme" will be established. perhaps this does mean that old points will not be honoured...which would definitely be a move in the wrong direction